Commercial viability of oil development
depends on factors such as the price of oil, quantity of oil, recovery/production
technology and proximity to infrastructure (i.e., pipelines). USGS
has estimated that ". . . the total quantity of technically recoverable
oil in the 1002 area [of ANWR] is 7.7 billion barrels of oil (mean value)
. . ." According to the USGS, estimates of technically recoverable
oil in the ANWR 1002 area (excluding State and Native areas) ranges
between 4.3 BBO (95 percent probability) and 11.8 BBO (5 percent probability).

What does this mean to the state of Alaska? Could production
of oil in ANWR help fill Alaska's fiscal gap?

Projections of when ANWR might be developed, even under
an aggressive development schedule, do not suggest that any royalty
or tax income to the state would be produced during this decade.

According to the Alaska Department of Revenue Fall 2001
Revenue Sources Book:

"The U.S. Department of Energy estimates it could
take a decade after approval of ANWR exploration for the first production.
Even if Congress approves ANWR this winter, [2001] it is likely the
first production would not come online until 2011, removing ANWR from
our estimate of undiscovered oil production for this decade.

"However, Alaska would receive some revenues from
lease sale(s) in ANWR, when and if these occur. According to the Department
of Revenue, potential income to the state from an ANWR lease sale "...
in 2004 could yield the state approximately $160 million. Assuming a
10-cent rule of thumb as a bonus bid, the companies would pay $320 million
for access to 3.2 billion barrels. The state would receive half of this
amount if revenue is shared in the same percentages as it is for the
NPRA." Revenue Sources, Fall, 2001, Alaska Department of Revenue,
Tax Division. December 2001, p. 41.

A SECOND OPINION

ANWR and the Alaska Economy, a study prepared in September
2002 by the McDowell Group, estimates state revenues based on 10.3 billion
barrels of recoverable oil from ANWR. This is the "mean" estimate
for the entire Coastal Plain area from the 1998 USGS study. The study
notes that the U.S. Department of Energy estimates that it would take
between 7 and 12 years from the time of approval to conduct a lease
sale to the first production of oil from ANWR.

The study projects unrestricted state general fund revenues
from royalties (based on a 50/50 split with the federal government),
severance taxes, property taxes, and income taxes associates with ANWR
oil production. The study also projects lease bonus revenues of $1.5
billion based on a US Department of Energy estimate. The estimates in
the table do not include the Permanent Fund contribution.

Different assumptions obviously can produce very different
projections of both the size and timing of revenues from ANWR production.
However as an example these projections demonstrate that any potential
revenues from ANWR (aside from lease bonus revenues) that could be used
to reduce the fiscal gap are a decade away.